LVNV v. Crawford, the FDCPA, and the End of a Circuit Split?

LVNV v. Crawford: Are Bankruptcy Debtors Limited to Bankruptcy Remedies?

For years, the courts have struggled over consumers’ remedies when creditors continue collection attempts in violation of the automatic stay. Under the Bankruptcy Code, consumers can bring a contempt of court action. Also, the Fair Debt Collection Practices Act (FDCPA) enables consumers to sue when creditors attempt to collect on invalid debts, which would seem to hold true even during the course of a bankruptcy case. Previously, the Ninth Circuit (which includes California), had limited consumers to the former remedy, while (presently) the Eleventh Circuit allowed for both.

On April 20, 2015, the Supreme Court denied certiorari (i.e. it declined to hear) LVNV v. Crawford, the aforementioned Eleventh Circuit case, seemingly resolving the split & allowing consumers to pursue both contempt & FDCPA actions.

Crawford’s History

Stanley Crawford filed a Chapter 13 case, during the course of which LVNV filed a proof of claim with the court, which all parties agreed was an attempt to collect on the debt. However, the since debt was past the statute of limitations, LVNV had no right to make such a collection attempt. Mr. Crawford brought an action for an FDCPA violation, but the Bankruptcy Court held that he was limited relief provided by the Bankruptcy Code. The Eleventh Circuit reversed.

Apparent Circuit Split

The Ninth Circuit had ruled in Walls v. Wells Fargo Bank, N.A., 276 F. 3d 502 (9th Cir. 2002) that the Bankruptcy Code was the only source of relief for people in Crawford’s position. Once a bankruptcy court had jurisdiction over a debt, and even after a discharge, the FDCPA was not an option for consumers.

Since the Eleventh Circuit had found consumers could bring an FDCPA claim even if there was a bankruptcy, most observers felt that a circuit split had been created and an appeal to the Supreme Court was all but certain. However, the Supreme Court declined to hear an appeal of Crawford, denying cert. and allowing the Eleventh Circuit decision to stay in place.

Where Does that Leave Us?

While the Supreme Court did not issue a ruling on the merits of LVNV v. Crawford, by declining to take the case it seems to be give the Eleventh Circuit’s ruling the seal of approval. It is unclear what the courts in the Ninth Circuit will do in light if the cert denial, but it seems clear that the Supreme Court sees no reason to not allow consumers in bankruptcy access to relief from improper creditor actions under both the Bankruptcy Code and the FDCPA.

This is potentially good news for people who file bankruptcy cases in California, as this decision opens the door to cases challenging the legitimacy of Walls.

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